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Price & Time: Will the Real Trend in USD Please Stand Up?

By , Sr. Currency Strategist
07 August 2013 12:15 GMT

This publication attempts to further explore the concept that mass movements of human psychology, as represented by the financial markets, are subject to the mathematical laws of nature and through the use of various geometric, arithmetic, statistical and cyclical techniques a better understanding of markets and their corresponding movements can be achieved.

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Foreign Exchange Price & Time at a Glance:

GBP/USD:

PT_stocks_body_Picture_4.png, Price & Time: Will the Real Trend in USD Please Stand Up?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • GBP/USD fell sharply on Wednesday before rebounding to trade to its highest level since late June
  • The intraday move through the July high at 1.5435 is concerning and a close over this level will shift the near-term trend to positive
  • The 50% retracement of the June to July decline at 1.5280 remains a key support and weakness below this level on a closing basis is needed to reinvigorate the broader downtrend
  • Near-term cycle studies are not the clearest, though a minor turn window is seen over the next day or so
  • A close over 1.5435 will turn us positive on Cable and beyond that 1.5500 looks like the next important price point to watch on the upside

Strategy: Stopped out of remaining short positions. Like being square for a little bit.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

GBP/USD

*1.5280

1.5325

1.5435

*1.5435

1.5500

AUD/USD:

PT_stocks_body_Picture_3.png, Price & Time: Will the Real Trend in USD Please Stand Up?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • AUD/USD traded to its lowest level in almost three years at the start of the week before rebounding modestly over the past few days
  • While under Gann resistance in the .9170 area our near-term trend bias will remain lower in the Aussie
  • The 161.8% extension of the mid-July advance near .8800 is the next key support with weakness below there needed to spur another leg lower
  • Near-term cycle studies favor some choppy sideways to higher trading over the next few days
  • Immediate resistance is seen at .9040, but only over .9170 would alter the negative technical structure and turn us positive on the Aussie

Strategy: Like the short side in AUD/USD while below .9170.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

AUD/USD

0.8800

0.8850

0.8935

0.9035

*0.9170

XAU/USD:

PT_stocks_body_Picture_2.png, Price & Time: Will the Real Trend in USD Please Stand Up?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • XAU/USD has come under steady downside pressure since failing last month near key Fibonacci symmetry in in the 1348 area
  • Subsequent weakness below 1310 has shifted our near-term trend bias to negative
  • A close below 1280 is now needed to force a more important move lower in Gold
  • Near-term cycles studies suggest Thursday is a minor turn window, but a more important window is not seen until the middle of the month
  • The 1310 area is now immediate resistance, but only a move through 1348 undermines the negative tone and turns us positive on the metal

Strategy: Like the short side in Gold while under 1348.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

XAU/USD

1248

*1213

1276

1310

*1348

Focus Chart of the Day: S&P 500

PT_stocks_body_Picture_1.png, Price & Time: Will the Real Trend in USD Please Stand Up?

The S&P 500 failed at the onset of the week near the 4th square root progression of the June low near 1710. As we have noted before, 4th and 6th square root progressions are common stopping points for markets even in the strongest of trends. Whether this move is the start of something more significant or just a “breather” before resuming the uptrend likely depends on what happens over the next week and a half or so. We say this because a variety of different cyclical methods all point to the first half of August as being quite significant for the index and a top of importance materializing during this time is more likely according to our method. The first window in this broader two-week turn period resulted in a low around 1675. The level now holds extreme significance for us as it should not be undercut if the index really is just in a correction phase. Any weakness below this level (especially on a closing basis) would be strong evidence that a much more important decline is indeed developing in the stock market.

--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

Looking for a way to pinpoint sentiment extremes in stocks in real time? Try the Speculative Sentiment Index.

To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX

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07 August 2013 12:15 GMT